Stocks remain firm while the dollar selloff gathers pace ahead of Friday’s US official unemployment data. Both the S+P and the Nasdaq touched yet new all-time highs on Thursday as traders looked past some mixed economic data, while remaining focused on a Covid vaccine although for once it has been the DJI which has been the best performing index, up by around 0.5% on the day, underpinned by a 7% rise in Boeing shares. Thursday’s data showed the number filing first-time claims for jobless benefits fell last week, beating expectations but remain extremely high at 712K (vs expectations of 770K), while the ISM Services figure failed to meet expectations and slowed to a six-month low in November.
The US$ looks increasingly vulnerable and fell to a new 2 year low as the DXY (US$ Index) hit a low of 90.50 ahead of a bounce to currently sit at 9.07, still down by another 0.5% on the day, with little support now seen ahead of 88.50. The Eur, Chf, Aud and Nzd all made multi-year highs against the US$, while Sterling is struggling because of Brexit, but even that managed to provide another test of the strong 1.3500 resistance. This has yet to be overcome, but a break would allow for a strong run higher, and above 1.3525 would allow for a run towards 1.3800; a no-deal Brexit would likely put paid to that theory rather quickly, and a swift return towards 1.3000 would then follow. Reports of little progress in the Brexit negotiations on Thursday saw a quick move from 1.4398 to 1.3430 was indicative of the nervousness going through the markets and keeping Sterling traders on their toes. US$Jpy saw the dollar d=fall back below 104.00, close to where it currently sits. It does look mildly heavy and another test of 103.50 may lie ahead but there is good support at 103.25. Below there would see an acceleration toward 103.00 and possibly even to 102.00. There are better things to look at right now.
In the commodity markets, the big performer was Iron Ore, up 7% on the session, and which will again underpin the Aud$ and the ASX. Gold put on 0.5%, while WTI is around 1% higher, despite the OPEC+ meeting announcing that an agreement had been reached to pare back the current production rate of 7.7 million bpd to 7.2 million bpd beginning in January, essentially raising collective production by 500,000 barrels a day. WTI took little notice and still looks as though it remains on course for a run towards $50pb over the next few months.
In the commodity markets, the big performer was Iron Ore, up 7% on the session, and which will again underpin the Aud$ and the ASX. Gold put on 0.5%, while WTI is around 1.5% higher despite OPEC+ signaling a 500K bpd output increase for January, as traders instead preferred to look towards the expected economic benefits from Covid vaccines, which are still being priced in to the markets. WTI still looks to me as though it remains on course for a run towards $50+pb over the next few months.
Looking ahead to Friday; apart from the Australian Retail Sales for October, there is nothing on the calendar at all until the release of the US official employment data for November with expectations currently of; Headline rate (6.8%)/NFP (+480K), Average Hourly Earnings (+0.1%), Average Weekly Hours (34.8). Have a good weekend.
Economic data highlights will include:
Fri: Australian Retail Sales, German Factory Orders, US Unemployment/NFP.
Market moves, in brief:
FX: DXY 90.70 (-0.48%)
Bonds: US10Y; 0.920% (-1.41%), German 10Y; -0.552% (-0.619%), UK 10Y; 0.326% (-6.90%), Australian 10Y; 1.028% (+3.38%), NZ 10Y; 0.908% (-0.72%), China 10Y; 3.31% (-0.08%)
Stock Indices: DJI; +0.74%, S+P; +0.35%, NASDAQ; +0.36%, EUStoxx50; -0.12%, FTSE100; +0.42%, Shanghai Composite; -0.21%, ASX200SPI: +0.40%
Metals: Gold $1839 oz (+0.49%), Silver $24.10 oz (+0.05%), Copper $3.49lb (+0.03%), Iron Ore $136 per tonne (NYMEX) (+7.0%),
Oil: WTI $45.75pb (+1.8%)
Trend Table: December 4, 2020
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In the trend table below, when looking at the charts for a particular FX pair, index or commodity, we are we searching for 2 or 3 consecutive boxes of the same colour which might indicate a trend – and a possible trading opportunity. Consecutive (1 & 4 hour, 4 hour/daily, daily/weekly) green boxes indicate a possible short/medium/long term uptrend; red, a possible downtrend, while blue signifies a neutral bias (range trade possibility). The boxes on the trend table merely replicate the look of the charts for the specific time-frame in MT4/5. Assets with a mixture of colours are pretty much ignored as choppy conditions seem likely to prevail.
For instance, if we see consecutive green boxes in the 1 hour and 4 hour time-frames for the FX pair “EURUSD”, that would signify the chance of a move higher in that pair over the next 24 hours. If the dailies were also green that would add to the bullish conviction from a slightly longer term perspective, and if the weeklies are also green then it would give added credence to the longer term bullish view, albeit that it might take longer for the trend to play out, so patience will almost certainly be required. The opposite would be true of red boxes, which could signify downward momentum. The strength of any possible trend depends on the time-frame, with the longer term (daily, weekly charts) obviously having a greater overall weighting than the short-term charts.
In the near term though, the 1 and 4 hour charts are what are likely to combine to indicate the possibility of a trading idea for the next few, possibly up to 24, hours.
Note that a longer term bullish view (green daily/weekly boxes) does not discount the possibility of near term dips (i.e. Red 1 & 4 hour boxes), which may indicate near term weakness and suggesting that we should be looking to buy dips for a longer term rally – and vice versa if the near term boxes are green and the longer term; red.
As with Thursday’s outlook, nothing has changed. I am travelling today, with no time for an indepth outlook, but I prefer to be short the US$ (vs. Eur, Aud, Nzd, ) and mildly long the stock markets and Gold. The Australian Retail Sales may provide some interest in the Aud$/ASX, otherwise all will be on hold until the NFP reading later in the day.
Sterling looks good on the charts and a 1.3500/25 break may seen an acceleration higher but Brexit headlines make it altogether too hard. US$Chf seems headed lower but the liquidity in the Euro makes that a better trade I think.
The US$ seems to be under increasing downside pressure now that the support in the DXY hat 92.00 has well and truly given way after falling to a new 2 ½ year low of 91.08. The Euro looks very firm indeed although the short term charts may need to pull back a bit allowing the momentum indicators to unwind, but buying dips seems to be the overall plan. The Euro is running into Fibo resistance at these levels so allow for a pullback towards 1.2000, which should now be decent support. Similarly, the Aud looks set to break higher although strong resistance remain intact at current levels, but I do suspect we are heading for 0.7500/25, while the Kiwi seems about to take on 0.7100+. Buying dips in either/both is preferred. I would stay away from Sterling – too hard because of Brexit – although it may be worth selling it against the Euro if you think we are headed for a “no-deal” outcome – which looks increasingly likely unless they can pull a rabbit out of the hat. With US$Chf now at a new 5 year low after having broken below 0.9000, the charts seem to have little/no support until 0.8800.
Stocks look neutral/positive and I suspect choppy sideways consolidation is in store. It maybe that we crawl to new highs in the US indices but I think progress will be slow. For now, buying dips with a suitable SL seems the most constructive outcome. With regard to the ASX SPI, I think today may be one of consolidation between 0.6580/0.6650, underpinned for the most part by the strong rise overnight in the Iron Ore Price.
Commodities look set to ratchet higher on the back of a weakening US$. Buying dips now in Gold, Silver and Oil seems to be the plan.
|1 Hour||Bearish Divergence||Down – Oversold||Overbought – Turning Lower?||Oversold – Turning higher?||Up – Overbought||Turning Lower?|
|4 Hour||Up – Overbought||Neutral – Turning Lower?||Neutral – Turning Higher?||Down||Turning Higher?||Turning Neutral|
|1 Day||Turning Higher||Turning Neutral||Neutral – Turning Higher?||Turning Lower?||Neutral – Turning Higher?||Turning Higher|
|1 Week||Turning Neutral||Turning Neutral||Turning Higher?||Turning Neutral||Neutral – Turning Higher?||Turning Higher|
|1 Hour||Bullish Divergence||Bearish Divergence||Neutral||Neutral – Turning Lower?||Neutral – Turning Lower?||Turning Neutral|
|4 Hour||Turning Lower?||Turning Neutral||Turning Neutral||Up||Turning Neutral||Neutral – Turning Higher?|
|1 Day||Turning Lower?||Turning Neutral||Possible Topping Formation||Possible Basing Formation||Turning Higher?||Turning Higher|
|1 Week||Possible Basing Formation||Up – Overbought||Up||Down||Down||Neutral|
|1 Hour||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Neutral – Turning Lower?||Bearish Divergence|
|4 Hour||Possible Topping Formation||Turning Lower?||Turning Neutral||Turning Neutral||Turning Lower?||Neutral – Turning Higher?|
|1 Day||Turning Higher||Neutral – Turning Higher?||Neutral||Turning Neutral||Turning Neutral||Possible Basing Formation|
|1 Week||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Turning Lower|